JUNE 8 2016 (The Conway Bulletin) — Russian lender Expobank, owned by Igor Kim, agreed to buy the Kazakhstan-based subsidiary of Britain’s Royal Bank of Scotland. Earlier this year, Mr Kim bought RBS’s Russian subsidiary. Orifzhan Shadiyev, owner of Capital Bank Kazakhstan, had, in March 2015, expressed an interest in buying RBS Kazakhstan although the deal later fell through.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 284, published on June 10 2016)
JUNE 10 2016 (The Conway Bulletin) — A wave of mergers, acquisitions and privatisations has hit Central Asia and the South Caucasus.
At The Bulletin, we’ve extensively covered the Kazkommertsbank buyout over the past two years. But elsewhere, from Azerbaijan to Uzbekistan, the banking sector is in a restructuring phase.
A renovation of the financial sector had become crucial after an extended economic downturn hit the money markets, from currency exchange rates to loan sustainability. What’s more, low oil prices, besides depressing budget capacity and economic growth, have hindered investment and project financing.
From small local lenders to country-wide behemoths, banks across Central Asia and the South Caucasus have equally suffered, albeit for different reasons.
And since the beginning of 2016, small quakes have shaken the sector.
In Azerbaijan, immediately after the sharp depreciation of the manat, middle and small-sized banks were unable to maintain the newly set capital ratio requirements, triggering failures and mergers.
This week a rather obscure deal involving an Uzbek bank and a German plastics manufacturer marked the beginning of the new privatisation era in Uzbekistan.
And of course, across the border in Tajikistan, we are now three weeks into the care-taking administration of the country’s second-largest bank.
This is both a stress test and an opportunity. 25-year-old countries cannot afford to have a banking crisis every decade. Dependent as they are on commodity prices and regional trade, they need to seize this occasion to build more reliable and stable foundations for their finance sector.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 284, published on June 10 2016)
JUNE 2 2016 (The Conway Bulletin) — Kazkommertsbank, Kazakhstan’s largest lender, said it had bought back part of its outstanding bonds, spending around $35m in total. In May, CEO Kenes Rakishev had said the bank was ready to repurchase as much as $500m in outstanding bonds. After the latest transaction, KazKom has to pay back around $522m from two bond issues due later this year and €392m ($437m) due in February 2017.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 283, published on June 3 2016)
MAY 23 2016 (The Conway Bulletin) — Halyk Bank, Kazakhstan’s second- largest bank, said profits fell by 33% in Q1 2016, compared to 2015 due to a slowdown in lending. The bank said high interest rates at the beginning of the year had scared away consumers. Importantly, Halyk also said the proportion of bad loans in its portfolio increased to 11.7% from 9.1% in Q4 2015.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 282, published on May 27 2016)
MAY 23 2016 (The Conway Bulletin) — Ratings agency Moody’s said that a number of Azerbaijani banks could soon default, on the same day that the government said the country’s largest lender had piled up an unsustainable amount of bad assets, painting a bleak picture for the country’s financial sector.
Problem loans and liquidity issues have dented the financial health of Azerbaijani banks since the Central Bank decided to float the manat currency against the US dollar, triggering a sharp depreciation in December last year.
“Several banks with B3 rating have high risk of default,” Petr Paklin, analyst at Moody’s Financial Institutions Group was quoted as saying.
Moody’s downgraded Bank of Baku, Unibank and Xalq Bank to B3 in January and it is now saying that these could default. All three are among Azerbaijan’s 10-largest lenders.
The country’s biggest bank, the International Bank of Azerbaijan, amassed overdue loans and other toxic assets over the past few months at such a rate that it triggered a comment, and possible help, from the government.
“The cleaning process of toxic assets from IBA’s balance sheet is underway,” Samir Sharifov, Azerbaijan’s finance minister told local media on May 20.
IBA has not yet published the latest figures on the share of non- performing loans in its portfolio, but analysts believe it is well above the 12% previously reported. Notably, IBA holds around half of all loans in the country.
Azerbaijan’s government, as IBA’s largest shareholder with a 54.9% stake, could decide to write-off overdue loans, effectively bailing it out. Clearly, Azerbaijan’s financial sector has suffered from the sustained low oil prices and the sharp depreciation of the manat. The downturn has hit customers, who have been unable to pay back their loans.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 282, published on May 27 2016)
MAY 20 2016 (The Conway Bulletin) — Bolat Nazarbayev, brother of Kazakhstan’s President Nursultan Nazarbayev, bought a 50% stake in the Ukrainian lender Eurobank. The remaining 50% of the bank is indirectly owned by Ukrainian financier Vadim Pushkarev. In 2014, Bolat Nazarbayev bought a 7.83% stake in Kazakhstan’s Bank RBK.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 282, published on May 27 2016)
MAY 20 2016 (The Conway Bulletin) — So, it’s becoming increasingly clear that the authorities in Tajikistan are using students to promote their causes.
Excellent reporting from our ‘Man in Dushanbe’ has exposed this practice. He has spoken to several students who have said their universities and teachers have forced them to either march in favour of government policies or demonstrate outside the embassies of countries which have irritated President Emomali Rakhmon by giving his enemies sanctuary.
This is a well-worn strategy in the former Soviet Union. When I was a correspondent in Moscow between 2006-9 I reported heavily on the growth of a youth group called Nashi and its various offshoots. Nashi was effectively a massive mobilisation of Russian youth, often whipped up into a frenzy to support various policies promoted by Vladimir Putin and Dmitri Medvedev, who was the Russian President at the time.
Their summer camps, set up in the dense forests of northern Russia, were an eye-opener. Pictures of opposition activists dressed up as prostitutes were placed around the site. In Moscow, Nashi rallies were rowdy affairs, nationalistic and with a violent undercurrent.
The movement in Tajikistan hasn’t reached these proportions yet and is less sophisticated but the authorities are still unleashing, while trying to control, the same forces.
It’s a crude, dangerous technique.
BANKING ISSUES
Sticking with Tajikistan, news that the country’s second largest bank has been placed under administration doesn’t come as a surprise. TSB has been listing heavily for a while. The strains on the Tajik economy have just become too great and it was only a matter of time before something gave. The important issue to monitor now is whether this is contagious and other Tajik banks also cave in.
It’s also important to keep the banking failure in context. The Tajik banking system may be weaker than its neighbours but all the Central Asian economies have been under the same pressures. Remittances from Russia have dried up, currencies have halved in value and GDP growth rates are being revised down. These banks were giving out soft loans for years and many of these will have turned bad.
If a bank in Tajikistan effectively says it doesn’t have any more money left, could banks in neighbouring Kyrgyzstan and Kazakhstan be experiencing the same problem?
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 281, published on May 20 2016)
MAY 17 2016 (The Conway Bulletin) – Kazakhstan’s Central Bank said it had given 62b tenge ($186m) in loans from the state’s Pension Fund to around 30 commercial banks, in an effort to boost their liquidity. Kazakhstan’s Pension Fund, previously held at commercial banks, was nationalised between 2013 and 2014. It held up to $20b. Last month, the Central Bank opened a credit line from the Fund for commercial banks.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 281, published on May 20 2016)
ALMATY, MAY 18 2016 (The Conway Bulletin) — Kazkommertsbank, Kazakhstan’s largest lender, said it wants to buy back up to $500m in Eurobonds due this year, a bullish response to a recent double downgrade it received from international ratings agencies.
In a wide-ranging press conference, KazKom’s new chairman Kenes Rakishev said the bank has enough liquidity to pay for its debt, which will reach maturity later in 2016 and in early 2017.
“While our consultants advise us to buy back $300m, we are ready to buy back $500m,” Mr Rakishev told media and investors. “It’s a business decision as it is now cheaper to deal in the domestic market than it was when the bonds were issued.”
Mr Rakishev was appointed chairman of KazKom earlier this month after effectively completing a buyout of the country’s largest bank. He is the son-in-law of Kazakh defence minister, Imangali Tasmagambetov. He owns large stakes in several major
Kazakh companies and is often considered to be working on behalf of more senior members of the Kazakh elite.
Earlier in the week, the ratings agency Standard & Poor’s had cut KazKom’s debt rating to CCC+ because it said that via its merger with BTA Bank, the indebted bank that the government had owned, KazKom had inherited a swathe of bad debt in foreign currencies.
Some analysts have said that the KazKom/BTA merger and Mr Rakishev’s takeover were driven by politics and not business.
Mr Rakishev, though, brushed the downgrade aside and pointed out that other ratings agencies had already factored this into their calculations and issued earlier downgrades.
“I think we’ve passed the darkest zone and that we will move on to a completely new zone and concentrate on how to eliminate negative things that have occurred,” he said.
And Mr Rakishev also said that he wanted KazKom to shift its emphasis into the SME sector.
“We have an opportunity here to grow,” he said. “And not only in Almaty and Astana but also in the regions.”
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 281, published on May 20 2016)
MAY 16 2016 (The Conway Bulletin) — SOFAZ, Azerbaijan’s sovereign oil fund, said it has no intention of increasing its 2.95% share in Russia’s VTB Bank, a sign, perhaps, that the economic downturn has bitten into Azerbaijan’s ability to buy assets abroad. SOFAZ has previously been increasing the size of equity stakes it owns in various companies. Earlier in May, the Russian government said it was looking for buyers to reduce its stake in VTB. VTB is the second largest bank in Russia and owns subsidiaries across the South Caucasus and Central Asia.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 281, published on May 20 2016)
